Exhibit 10.1

LOAN AND SECURITY AGREEMENT

dated as of March 24, 2005

by and among

K-SEA OPERATING PARTNERSHIP L.P.,

as Borrower,

the Lenders party hereto,

LASALLE BANK NATIONAL ASSOCIATION,

as Syndication Agent

and

KEYBANK NATIONAL ASSOCIATION,

as Administrative Agent and Collateral Trustee for the Lenders

TABLE OF CONTENTS

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THIS LOAN AND SECURITY AGREEMENT (this “ Agreement ”), dated as of March 24, 2005, among K-SEA OPERATING PARTNERSHIP L.P. , a Delaware limited partnership (“ Borrower ”), the Lenders party hereto (the “ Lenders ”), LASALLE BANK NATIONAL ASSOCIATION , as syndication agent, and KEYBANK NATIONAL ASSOCIATION , a national banking association (“ KeyBank ”), as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”), and as collateral trustee for Lenders (in such capacity, the “ Collateral Trustee ”).

RECITALS

WHEREAS , Borrower desires to obtain loan facilities in the initial aggregate amount of Eighty Million Dollars ($80,000,000.00) in order to refinance certain outstanding obligations of the Borrower and its Affiliates under current senior credit facilities, finance the ongoing working capital and capital expenditures of the Borrower and its affiliates, obtain the issuance of Letters of Credit and for general corporate purposes, including acquisitions, and

WHEREAS , Lenders have agreed to provide Borrower with a revolving credit facility in the amount up to Eighty Million Dollars ($80,000,000.00) (with a Twenty Million Dollar ($20,000,000.00) sublimit for Letters of Credit) (the “ Facility ”) that shall be secured by all the Collateral (as hereinafter defined) and otherwise subject to the terms and conditions of this Agreement.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01                             Defined Terms .   As used in this Agreement, the following terms have the meanings specified below:

“ Adjusted LIBOR Rate ” means, with respect to any LIBOR Loan for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) LIBOR for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“ Administrative Agent ” means KeyBank National Association, a national banking association, in its capacity as administrative agent for Lenders hereunder.

“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, provided , however , that with respect to Borrower and K-Sea, this term shall not be deemed to describe any Person who is not any of Borrower, the general partner of Borrower, K-Sea or a direct or indirect subsidiary of K-Sea.

“ Agent ” means Administrative Agent and/or Collateral Trustee, as the case may be.

“ Alternative Currency ” means any currency freely transferable into Dollars to the extent that such currency is approved by the Administrative Agent and the L/C Issuer.

“ Anniversary Date ” means the date occurring one (1) year after the Effective Date and the same date in every year thereafter.

“ Applicable Law ” means all applicable provisions of all (a) constitutions, statutes, ordinances, rules, regulations and orders of all governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c) order, judgments and decrees of all courts and arbitrators.

“ Applicable Margin ” means, at all times during the applicable periods set forth below: (a) with respect to Base Rate Loans, the percentage set forth below under the heading “Base Rate Margin” and adjacent to such period, (b) with respect to LIBOR Loans, the percentage set forth below under the heading “LIBOR Margin” and adjacent to such period and (c) with respect to the Commitment Fees, the percentage set forth below under the heading “Commitment Fee Margin” and adjacent to such period:

Changes in the Applicable Margin resulting from a change in the Total Funded Debt to EBITDA Ratio shall be based upon the certificate most recently delivered under Section 6.01(b) and shall become effective on the first day of the month immediately succeeding the date such certificate is required to be delivered to the Administrative Agent pursuant to Section 6.01(b).  Notwithstanding anything to the contrary in this definition, (i) if Borrower shall fail to deliver to the Administrative Agent such a certificate on or prior to any date required by Section 6.01(b), the Total Funded Debt to EBITDA Ratio shall be deemed to be greater than 3.25:1.00 from and including such date to the first day of the month immediately succeeding the date of delivery to the Administrative Agent of such certificate and (ii) during the period commencing on the Effective Date and ending on the first day of the month immediately succeeding the date that the certificate to be delivered under Section 6.01(b) for the fiscal quarter ending June 30, 2005 is to be delivered to the Administrative Agent, the Applicable Margin shall be 0.000% for Base Rate Loans, 1.750% for LIBOR Loans and 0.250% with respect to the Commitment Fees.

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“ Applicable Percentage ” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment.

“ Appraisal ” means any appraisal, either visual or desktop or both, as determined by an appraiser, of the Pool Vessels, conducted from time to time by an Appraiser acceptable to the Administrative Agent pursuant to the terms of this Agreement and shall also include the appraisal of the Pool Vessels performed by the Administrative Agent prior to the date hereof, or at the Administrative Agent’s direction, by an appraiser appointed by Administrative Agent and paid for by Borrower.

“ Appraiser ” means any one of L&R Midland, Marcon International, Inc., Merrill Marine Services, Inc., or any other Person agreed to by Borrower and the Administrative Agent.

“ Asset Coverage Ratio ” means, as of any date of determination, the ratio of the Orderly Liquidation Value of all Pool Vessels that are part of the Collateral divided by the aggregate Revolving Credit Exposure of all Lenders.

“ Asset Disposition ” means the disposition of any or all of the fixed assets of the Borrower or any of its Subsidiaries included in the Collateral whether by sale, lease, transfer or otherwise (but excluding damage, destruction, loss or condemnation); provided , however , prior to the occurrence of an Event of Default, the term “ Asset Disposition ” shall not include (a) any sale, lease, transfer or other disposition of (i) inventory in the ordinary course of business; (ii) obsolete or worn out equipment; (iii) traded-in equipment, (iv) assets by Borrower to a Guarantor or by a Guarantor to Borrower or another Guarantor; or (v) transfers permitted under Section 7.07, (b) sale-leaseback transactions not otherwise prohibited hereby and (c) charters or other employment contracts of Pool Vessels not otherwise prohibited hereby.

“ Assignment and Acceptance ” means an assignment and acceptance entered into by any Lender and an assignee (with the consent of any party whose consent is required by Section 10.07 hereof), and accepted by Administrative Agent, in the form of Exhibit B or any other form approved by Administrative Agent.

“ Assignments ” means, collectively, the Earnings Assignment and the Assignment of Insurances.

“ Assignment of Insurances ” means the first priority assignment of insurances respecting the Pool Vessels granted by Borrower in favor of the Collateral Trustee in form and substance satisfactory to Administrative Agent.

“ Availability Period ” means the period from and including the Effective Date to, but excluding, the earlier of the Termination Date and the date of termination of the Commitments.

“ Base Rate ” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate, or (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate.  Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

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“ Base Rate Loan ” means any Loan bearing interest at the Base Rate.

“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America.

“ Borrower ” means K-Sea Operating Partnership L.P., a Delaware limited partnership.

“ Borrowing Base ” means 80% of the Orderly Liquidation Value of the Pool Vessels.

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided , that when used in connection with a Loan that bears interest at a rate per annum equal to the LIBOR Rate (including any notice in respect thereof), the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“ Capital Expenditures ” means any expenditure or liability that is properly charged to a capital account or otherwise capitalized on Borrower’s consolidated balance sheet in accordance with GAAP.

“ Capital Lease Obligations ” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq . and as further amended from time to time.

“ Change in Control ” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of ownership interests representing more than 50% of the general partnership interest in K-Sea or more than 50% of the aggregate ordinary voting power represented by the issued and outstanding ownership interests of Borrower or any Subsidiary Guarantor, or (b) for the period of twelve (12) consecutive calendar months, a majority of the board of Borrower or any Guarantor shall no longer be composed of individuals (i) who were members of said board on the first day of such period, (ii) whose election or nomination to said board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of said board, or (iii) whose election or nomination to said board was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of said board.

“ Change in Law ” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or

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application thereof by any Governmental Authority after the date of this Agreement, including, without limitation, any change in any statutory, regulatory or institutional reserve requirement, including, but not limited to, the Statutory Reserve Rate, or (c) compliance by any Lender (or, for purposes of Section 2.11(b) hereof, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“ Classification Society ” means the American Bureau of Shipping or such other classification society acceptable to Lenders.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Collateral ” means the collateral described in this Agreement, including, but not limited to, in Article III hereof, the Assignments and the Mortgage, including, without limitation, the Pool Vessels, and the Proceeds thereof, all insurance with respect to the Pool Vessels, any and all charters of the Pool Vessels by Borrower and all Hire and other amounts payable from time to time thereunder and the Proceeds thereof, all future charters of the Pool Vessels by Borrower, including all Hire payments and Proceeds of the foregoing and all amounts payable hereunder as more specifically described herein and in the Assignments and the Mortgage.

“ Collateral Trustee ” means KeyBank National Association in its capacity as collateral trustee for Lenders hereunder.

“ Commitment ” means, with respect to each Lender, the commitment of such Lender to make Loans hereunder, expressed as an amount representing one hundred percent (100%) of the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 hereof, and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.07 hereof.  The initial amount of each Lender’s Commitment is set forth (x) on Schedule 2.01 or (y) in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable.

“ Commitment Fee ” has the meaning set forth in Section 2.10.

“ Commitment Fee Margin ” has the meaning set forth in the definition of “ Applicable Margin ”.

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Credit Party ” means each of Borrower, each Guarantor and each of their respective Subsidiaries; provided , however , “ Credit Party ” shall exclude Inversiones Kara Sea Srl.

“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

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“ Distributions ” means, with respect to any Person (i) cash distributions or any other distributions on, or in respect of, any ownership interest or any membership or partnership interest of such Person, and (ii) any and all funds, cash or other payments made in respect of the redemption, repurchase or acquisition of such interest.

“ Documentary Letter of Credit ” shall have the meaning ascribed thereto in Section 2.02(c) hereof.

“ Dollar Equivalent ” means, at any date of determination thereof, with respect to an amount of an Alternative Currency, the amount of Dollars which could be purchased with such amount of such Alternative Currency at the spot exchange rate therefor as quoted by the Administrative Agent as of 11:00 a.m. (New York City time) on the date two Business Days prior to the date of any determination thereof for purchase on such date (or, in the case of any determination pursuant to Section 10.18, on the date of determination).

“ Dollars ” or “ $ ” refers to lawful money of the United States of America.

“ Earnings Assignment ” means the general assignment for security interest purposes of all charters, charter hire, freights and earnings with respect to the Pool Vessels granted by Borrower in favor of the Collateral Trustee, in form and substance satisfactory to the Administrative Agent.

“ EBITDA ” means, with respect to any fiscal period of K-Sea and its consolidated Affiliates, including, without limitation, Borrower and each Guarantor, on a consolidated basis, the sum of:

(1)                                   the net income (or net loss) of Borrower (determined in accordance with GAAP) for such fiscal period, without giving effect to any extraordinary pre-tax gains or losses; plus:

(2)                                   to the extent that any of the items referred to in any of clauses (i) through (iii) below were deducted in calculating such net income:

(i)                                      Interest Expense of Borrower for such fiscal period;

(ii)                                   federal and state income tax expenses of Borrower for such fiscal period;

(iii)                                the amount of all depreciation and amortization for such fiscal period; minus

(3)                                   to the extent added in calculating such net income, gains from sales, exchanges and other dispositions of assets not in the ordinary course of business.

“ Effective Date ” means the date on which the conditions specified in Section 5.01 hereof are satisfied (or waived in accordance with Section 10.06 hereof).

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“ Environmental Action ” means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement arising under any Environmental Law or Environmental Permit relating to Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment in connection with or arising from exposure to or the actual or potential release of Hazardous Materials, including (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages, and (b) by any Governmental Authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“ Environmental Event ” means (a) an environmental event that has occurred or any environmental condition that is discovered in, on, beneath, from or involving any of the Pool Vessels (including the presence, emission or release of Hazardous Materials or the violation of any applicable Environmental Law) for which a remediation or reporting could reasonably be required under applicable Environmental Law, or (b) notification received by Borrower, any Guarantor or any charterer of a Pool Vessel that such charterer, such Guarantor, Borrower, or any Pool Vessel is the subject of an Environmental Action relating to such Pool Vessel that could reasonably be expected to result in any ordered remediation or corrective action or other material liability under applicable Environmental Law.

“ Environmental Law ” means any and all applicable international, foreign, federal, state, regional and local laws (as well as obligations, duties and requirements relating thereto under common law) relating to:  (a) emissions, discharges, spills, releases or threatened releases of pollutants, contaminants, Hazardous Materials, materials containing Hazardous Materials, or hazardous or toxic materials or wastes into ambient air, surface water (including, without limitation, all inland and ocean waters), groundwater, watercourses, publicly or privately-owned treatment works, drains, sewer systems, wetlands, septic systems or onto land; (b) the use, treatment, storage, disposal, handling, manufacturing, transportation, or shipment of Hazardous Materials, materials containing Hazardous Materials or hazardous and/or toxic wastes, materials, products or by-products (or of equipment or apparatus containing Hazardous Materials); or (c) pollution or the protection of human health, safety or the environment from exposure to or injury or damage caused by Hazardous Materials.  Without limitation, “ Environmental Law ” includes CERCLA and OPA 90 and IMO 13(g) (when and if the latter comes into effect).

“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ Environmental Permit ” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

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“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that, together with Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ ERISA Event ” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“ Event of Default ” has the meaning assigned to such term in Article VIII hereof.

“ Event of Loss ” means, with respect to any Pool Vessel, the actual or constructive loss or the disappearance of such Pool Vessel or the loss of use thereof, due to theft, destruction, damage beyond repair or damage from any reason whatsoever, to an extent which makes repair uneconomical, or rendition thereof unfit for normal use, or the condemnation, confiscation or seizure of, or requisition of title to such Pool Vessel by any Governmental Authority or any other Person, or the requisition of use of any Pool Vessel by any non-United States Governmental Authority, in each case whether or not acting under color of Governmental Authority.

“ Existing Letters of Credit ” means, collectively, (a) Irrevocable Standby Letter of Credit No. S308212 dated January 14, 2004 issued by KeyBank in favor of the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, as beneficiary, in the aggregate amount of $6,485,000 (the “ Existing MARAD Letter of Credit ”) and (b) Irrevocable Standby Letter of Credit No. S309764 dated November 3, 2004 issued by KeyBank in favor of New York State Department of Taxation and Finance, as beneficiary, in the aggregate amount of $2,000.

“ Excluded Taxes ” means, with respect to the Administrative Agent, the Collateral Trustee, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its

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net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Administrative Agent, such Lender or such other recipient is located, and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.17(b) hereof), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender’s failure or inability to comply with Section 2.13(d) hereof, except to the extent that such Foreign Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.13(a) hereof.

“ Extraordinary Receipt ” means any cash received by or paid to or for the account of any Person consisting of proceeds of casualty type insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), and condemnation awards (and payments in lieu thereof) and indemnity payments relating to third party claims; provided , however , that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance, condemnation awards (and payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments (a) in respect of loss or damage to Pool Vessels, equipment, fixed assets or real property are applied (or in respect of which expenditures were previously incurred) to replace or repair the Pool Vessels, equipment, fixed assets or real property in respect of which such proceeds, awards or payments were received in accordance with the terms of the Loan Documents, so long as such application, or commitment to make such application, is made within twelve (12) months after the occurrence of such damage or loss; or (b) are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto.

“ Facility ” means the revolving facility in the aggregate amount outstanding at any time not to exceed the Maximum Amount with a sublimit for Letters of Credit in the amount of Twenty Million Dollars ($20,000,000.00) as described in Section 2.02(c) hereof.

“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Financial Officer ” means the chief financial officer, principal accounting officer, treasurer or controller of Borrower.

“ Financial Statements ” means the balance sheet and statement of income and cash flows of K-Sea and its consolidated Affiliates (including, without limitation, Borrower and all

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Guarantors), on a consolidated basis, as required from time to time to be provided by Borrower under this Agreement.

“ Fixed Charge Coverage Ratio ” means, at any date of determination, the ratio of (a) EBITDA less Maintenance CAPEX divided by (b) Fixed Charges, in each case for the four fiscal quarter period ending on such date or, if such date is not the last day of a fiscal quarter, for the immediately preceding four fiscal quarter period.

“ Fixed Charges ” means the sum, for any period for K-Sea and its consolidated Affiliates, including, without limitation, Borrower and any Guarantor, on a consolidated basis, of the following:  (i) Interest Expense, plus (ii) the current portion of capital lease payments, plus (iii) Scheduled Principal Payments, plus (iv) cash income taxes.

“ Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

“ GAAP ” means generally accepted accounting principles in the United States of America, as may be determined by the Financial Accounting Standards Board.

“ Government Approval ” means an authorization, consent, non-action, approval, license or exemption of, registration or filing with, or report to, any governmental or quasi-governmental department, agency, body or other unit.

“ Governmental Authority ” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Guarantee ” of or by any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided , that the term Guarantee shall not include any endorsement for collection or deposit in the ordinary course of business.

“ Guarantors ” means, collectively, K-Sea and any Subsidiary Guarantor from time to time, and each, a “ Guarantor .”

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“ Hazardous Materials ” means (a) hazardous materials, hazardous wastes, and hazardous substances as those or similar terms are defined under any Environmental Laws, including, but not limited to, the following:  the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq. , as amended from time to time, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. , as amended from time to time, CERCLA, the Clean Water Act, 33 U.S.C. Section 1251 et seq. , as amended from time to time, the Clean Air Act, 42 U.S.C. Section 7401 et seq. , as amended from time to time, and/or the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq. , as amended from time to time, OPA 90; (b) petroleum and petroleum products, including crude oil and any fractions thereof; (c) natural gas, synthetic gas, and any mixtures thereof; (d) asbestos and/or any material which contains any hydrated mineral silicate, including, but not limited to, chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable or non-friable; (e) polychlorinated biphenyls (“ PCBs ”), or PCB-containing materials or fluids; (f) radon; (g) any other hazardous radioactive, toxic or noxious substance, material, pollutant, or solid, liquid or gaseous waste; and (h) any hazardous substance that, whether by its nature or its use, is subject to regulation under any Environmental Law or with respect to which any international, federal, state or local Environmental Law or governmental agency requires environmental investigation, monitoring or remediation.

“ Hedging Agreement ” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement (excluding fuel surcharge) or other interest or currency exchange rate or commodity price hedging arrangement.

“ Hire ” means all charter hire under any and all charters entered into by or on behalf of Borrower of any Pool Vessel from time to time, together with additional hire, supplemental hire, requisition hire, freights and any other amounts paid to or for the account of Borrower on account of the use or employment of such Pool Vessel.

“ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all operating lease obligations of such Person, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, and (k) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances; provided , however , that “Indebtedness” shall not include (x) Secured Nonrecourse Obligations and (y) nonrecourse obligations incurred in connection with leveraged lease transactions as determined in accordance with GAAP.

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

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“ Interest Expense ” means, for any period, the sum, for K-Sea and its consolidated Affiliates, including, without limitation, Borrower or any Guarantor, on a consolidated basis, of the following:  (a) all interest in respect of Indebtedness (including the interest component of any payments in respect of Capital Lease Obligations) accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net amount payable (or minus the net amount receivable) under Hedging Agreements relating to interest during such period (whether or not actually paid or received during such period).

“ Interest Payment Date ” means, (i) with respect to any Base Rate Loan, the last day of each calendar month, provided , that if any Interest Payment Date would end on a day other than a Business Day, such Interest Payment Date shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Payment Date shall end on the next preceding Business Day, and (ii) with respect to any LIBOR Loan, shall mean the last day of the relevant Interest Period, provided interest on any LIBOR Loan having an Interest Period of six (6) months shall be payable three (3) months after the first day of such Interest Period as well as on the last day of the relevant Interest Period.  For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made.

“ Interest Period ” means with respect to a LIBOR Loan, the period commencing on the date of the making of such LIBOR Loan and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as Borrower may elect, provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of the making of a LIBOR Loan initially shall be the date on which such LIBOR Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such LIBOR Loan.

“ Interest Rate ” means the applicable interest rate as set forth in Section 2.03 hereof.

“ KeyBank ” means KeyBank National Association.

“ K-Sea ” means K-Sea Transportation Partners L.P.

“ L/C Issuer ” means KeyBank.

“ Lender Affiliate ” means, (a) with respect to any Lender, (i) an Affiliate of such Lender that is in the business of making and/or buying loans of the type described herein, or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by any Lender or an Affiliate of such Lender, and (b) with respect to any Lender that is a fund which invests in bank loans and

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similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“ Lenders ” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance.

“ Letter of Credit ” means either a Documentary Letter of Credit or a Standby Letter of Credit.

“ Letter of Credit Exposure ” means in respect of any Lender at any time, an amount equal to (i) the sum (without duplication) at such time of (x) the aggregate amount available for drawing under the outstanding Letters of Credit, (y) the aggregate amount of unpaid drafts drawn on all Letters of Credit, and (z) the aggregate unpaid Reimbursement Obligations, multiplied by (ii) such Lender’s Applicable Percentage at such time

“ Letter of Credit Sublimit ” means $20,000,000.

“ LIBOR ” means, with respect to the Interest Period applicable to any LIBOR Loan, a rate of interest per annum, as determined by the Administrative Agent, equal to the rate for deposits in Dollars for a period comparable to such Interest Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two Business Days prior to the first day of such Interest Period.  If such rate does not appear on Telerate Page 3750, the LIBO Rate shall be the rate per annum (rounded, if necessary, to the nearest one hundred-thousandth of a percentage point) at which deposits in Dollars are offered by four major banks in the London interbank market at approximately 11:00 a.m., London time, on the day that is two Business Days prior to the first day of such Interest Period to prime banks in the London interbank market for a period of one month commencing on the first day of such Interest Period in an amount comparable to the principal amount of such LIBOR Loan.  The Administrative Agent will request the principal London office of each such bank to provide a quotation of its rate.  If at least two such quotations are provided as requested, the rate for such Interest Period shall be the arithmetic mean of the quotations.  If fewer then two quotations are provided as requested, the rate for such Interest Period shall be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Administrative Agent, at approximately 11:00 a.m., New York City time, on the date that is two Business Days prior to the first day of such Interest Period for loans in Dollars to leading European banks for a period of one month commencing on the first day of such Interest Period in an amount comparable to such LIBOR Loan.

“ LIBOR Loan ” means any Loan bearing interest at the LIBOR Rate.

“ LIBOR Rate ” means the Adjusted LIBOR Rate plus the Applicable Margin.

“ Lien ” means, with respect to any asset, any interest in property securing an obligation owed to, or a claim by, any person other than the owner of the property, whether such interest shall be based on common law, maritime law, statute, contract or conveyance and including, but not limited to, the security interest lien arising from any pledge, mortgage, chattel mortgage,

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charge, encumbrance, conditional sale or trust receipt, or from a charter, consignment or bailment for security purposes and any tax lien, mechanic’s lien, materialman’s lien, workman’s lien, repairman’s lien, any financing statement or other similar charge or encumbrance.

“ Loan ” has the meaning assigned to such term in Section 2.02(b) hereof and includes, without limitation, all amounts debited to reimburse the L/C Issuer for drawdowns against a Letter of Credit and related expenses provided at the request of Borrower pursuant to Section 2.15 hereof.

“ Loan Accounts ” means one or more loan accounts maintained by the Administrative Agent for Borrower in the ordinary course of business, including, without limitation, any loan account in respect of the Facility, and each, a “ Loan Account .”

“ Loan Documents ” means, collectively, this Agreement, the Notes, the Mortgage, the Parent Guaranty, any Subsidiary Guaranty, the Assignments and all consents given with respect to any of the foregoing.

“ Loan Request ” means a request by Borrower for a Loan in accordance with Section 2.05 hereof.

“ Maintenance CAPEX ” means all Capital Expenditures made for the purpose of maintaining (and not increasing) the operating capacity of the Pool Vessels during the twelve (12) calendar months immediately preceding any date of determination thereof.

“ Managing Person ” means, with respect to any Person that is (a) a corporation, its board of directors, (b) a limited liability company, its board of control, managing member or members, (c) a limited partnership, its general partner, (d) a general partnership or a limited liability partnership, its managing partner or executive committee or (e) any other Person, the managing body thereof or other Person analogous to the foregoing.

“ Material Adverse Effect ” means a material adverse effect on (a) the Collateral, (b) the property, business, operations, financial condition, liabilities or capitalization of K-Sea and its consolidated Affiliates, including, without limitation, Borrower and each Guarantor, taken as a whole, (c) the ability of Borrower to perform any of its obligations under this Agreement (including the timely payment of all amounts due hereunder), (d) the rights of or benefits available to the Administrative Agent, Collateral Trustee and the Lenders under this Agreement, or (e) the validity or enforceability of this Agreement.

“ Material Indebtedness ” means Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of K-Sea, Borrower and its Subsidiaries in an aggregate principal amount exceeding $100,000.00.  For purposes of determining Material Indebtedness, the “principal amount” of the obligations of K-Sea, Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that K-Sea, Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

“ Maturity Date ” means the Termination Date.

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“ Maximum Amount ” means, with respect to the Facility, Eighty Million Dollars ($80,000,000.00), as such amount may be increased in the aggregate in accordance with Section 2.18 hereof.

“ Minimum Loan Amount ” means, with respect to any LIBOR Loan, a minimum amount of Five Hundred Thousand Dollars ($500,000.00), with additional amounts in increments of One Hundred Thousand Dollars ($100,000.00) and, with respect to any Base Rate Loan, a minimum amount of One Hundred Thousand Dollars ($100,000.00) with additional amounts in increments of One Hundred Thousand Dollars ($100,000.00).

“ Mortgage ” means the First Preferred Fleet Mortgage, dated the date hereof, granted by Borrower to the Collateral Trustee over the whole of the Pool Vessels, as the same may be amended, modified or supplemented from time to time and from which Pool Vessels may be added or released from time to time.

“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“ Net Proceeds ” means, with respect to any Asset Disposition by any Person, or any Extraordinary Receipt received by or paid to or for the account of any Person, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, investment banking fees, underwriting fees and discounts, legal fees, accounting fees, finder’s fees and other similar out-of-pocket costs, (b) the amount of taxes paid or payable in connection with or as a result of such transaction and (c) with respect to any asset, the amount of any Indebtedness secured by a Lien on such asset that, by the terms of such transaction, is repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of such Person or any Credit Party or any Affiliate of any Credit Party and are properly attributable to such transaction or to the asset that is the subject thereof.

“ Non-Qualified Pool Vessel ” means any Pool Vessel that is (i) a vessel required to be phased out at any time by OPA 90, (ii) not qualified or documented with endorsement for the United States coastwise trade, or (iii) a vessel which is part of an incomplete two-vessel operating unit (comprised of a specific tug-barge combination).

“ Notes ” means collectively the Notes evidencing Loans under the Facility as described in Section 2.08 hereof.

“ Obligations ” means (a) the due and punctual payment of (i) principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans or the Letter of Credit Exposure, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) all other monetary obligations, including fees, commissions, costs, expenses and indemnities, whether

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primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower or any other Credit Party to the Administrative Agent, the Lenders or the L/C Issuer, or that are otherwise payable to the Administrative Agent, the Lenders or the L/C Issuer, under this Agreement and the other Loan Documents and (iii) all obligations of Borrower, monetary or otherwise, under each Hedging Agreement entered into with any Lender (or any Affiliate thereof) as a counterparty and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of Borrower or any other Credit Party under or pursuant to this Agreement and the other Loan Documents.  This term includes all principal, interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), fees, charges, expenses, attorneys’ fees and any other sum chargeable to any Credit Party under this Agreement or any of the other Loan Documents.

“ OPA 90 ” means the Oil Pollution Act of 1990, P.L. 101-380, 104 Stat. 484 et seq ., as amended from time to time.

“ Orderly Liquidation Value ” means, with respect to any Pool Vessel, the net proceeds anticipated at a sale other than a forced sale upon foreclosure, as reasonably determined by the Administrative Agent or by independent appraisers appointed by the Administrative Agent at the expense of Borrower.

“ Organizational Documents ” means as to any Person which is (a) a corporation, the certificate or articles of incorporation and by-laws of such Person, (b) a limited liability company, the limited liability company agreement or similar agreement of such Person, (c) a partnership, the partnership agreement or similar agreement of such Person, or (d) any other form of entity or organization, the organizational documents analogous to the foregoing.

“ Other Taxes ” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

“ Parent Guaranty ” means that certain guaranty, dated the date hereof, executed by K-Sea in favor of Lenders in form and substance acceptable to Lenders in their sole discretion.

“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Permitted Acquisition ” means the purchase, holding or acquisition of (including pursuant to any merger) any capital stock or other securities (including any option, warrant or other right to acquire any of the foregoing) of any other Person, or the purchase or acquisition of (in one transaction or a series of transactions (including pursuant to any merger)) any assets of any other Person constituting a business unit, provided that, (i) at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (ii)

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such Person or business unit, as the case may be, is in substantially the same business as Borrower and (iii) Borrower shall have complied with the provisions of Section 6.18 with respect to such Person.

“ Permitted Liens ” means:

(a)                                   Liens imposed by law for taxes or under ERISA in respect of contingent liabilities thereunder that are not yet due;

(b)                                  carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, including, but not limited to, liens for current wages of the crew of any Pool Vessel, including the master of such Pool Vessel, for current wages of stevedores when employed directly by such Pool Vessel or for general average or salvage, including contract salvage or liens arising in the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days and in each such case such liens are subordinate to the Lien of the Mortgage; and

(c)                                   Liens arising out of bareboat charters of Pool Vessels to K-Sea Transportation Inc. covering the Pools Vessels described on Schedule 4.14;

provided , that the term “Permitted Liens” shall not include any Lien securing Indebtedness; and, provided , further , that the aggregate amount of Permitted Liens outstanding on all Pool Vessels at any one time shall not exceed $1,500,000.

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Pool Vessels ” means those vessels identified on Schedule 1.01 hereto, together with any vessels hereafter added to the Pool Vessels pursuant to Section 3.02 or Section 3.03 hereof.

“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by KeyBank National Association as its prime commercial lending rate; each change in the Prime Rate being effective from and including the date such change is publicly announced as being effective. The Prime Rate is not intended to be lowest rate of interest charged by KeyBank National Association in connection with extensions of credit to borrowers.

“ Proceeds shall have the meaning assigned to it in the UCC and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity or warranty payable to Lenders, from time to time with respect to the Pool Vessels or other Collateral; (ii) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any sale, requisition, confiscation, condemnation, seizure or forfeiture of all and

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any part of the Pool Vessels by any governmental body, authority, bureau or agency of any other Person (whether or not acting under color of governmental body); and (iii) accounts arising out of, any charter or chattel paper evidencing, any lease, contract for use or lease of, any and all other rents, hire or profits or other amounts from time to time paid or payable to Lenders in connection with, the Pool Vessels.

“ Prohibited Jurisdiction ” means any country or jurisdiction, from time to time, (a) that is subject of a prohibition order (or any similar order or directive), sanctions or restrictions promulgated or administered by the Office of Foreign Assets Control of the United States Treasury Department, or (b) in which, or for which, any Lender, which is a Lender on the Effective Date, is otherwise prohibited or restricted, under laws, regulations, sanctions or restrictions applicable to it or its business, from extending credit, transferring property or assets, engaging in or facilitating trade or other economic activity, or otherwise doing business.

“ Prohibited Person ” means any Person appearing on the Specially Designated Nationals List compiled and disseminated by the Office of Foreign Assets Control of the United States Treasury Department, as the same may be amended from time to time.

“ Proposed Increased Commitment ” has the meaning assigned to such term in Section 2.18 hereof.

“ Qualified Pool Vessels ” means Pool Vessels that are documented, coastwise eligible tugs, AT/Bs and double-hulled barges and are acceptable in age, construction, condition and trade employment to the Administrative Agent; provided , that during the period from the Effective Date to the third Anniversary Date, “ Qualified Pool Vessels ” may also include single-hulled barges having an Orderly Liquidation Value not in excess of five percent (5%) of the aggregate Orderly Liquidation Value of all Pool Vessels.

“ Register ” has the meaning assigned to such term in Section 10.07(c) hereof.

“ Reimbursement Obligation ” means, collectively, the obligation of Borrower to the L/C Issuer with respect to each Letter of Credit and all documents, instruments and other agreements related thereto, including the obligation of Borrower to reimburse the L/C Issuer for amounts drawn under such Letter of Credit.

“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“ Required Lenders ” means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing a percentage equal to or greater than sixty-six and two third percent (66.67%) (or in the case, at any time, that the number of Lenders equals two or less, then one hundred percent (100%)) of the sum of the total Revolving Credit Exposure and unused Commitments at such time.

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“ Revolving Credit Exposure ” means, with respect to any Lender at any time, the sum as of such time of (i) the outstanding principal balance of such Lender’s Loans, plus (ii) such Lender’s Letter of Credit Exposure.

“ Scheduled Principal Payments ” means, with respect to any Person as of any date, all scheduled payments of principal on Indebtedness paid by such Person during the twelve (12) calendar month period immediately preceding such date; provided that any Indebtedness repaid in full or in part from proceeds of Loans shall be excluded (entirely, in the case of Indebtedness repaid in full and partially to the extent of such repayment, in the case of Indebtedness repaid in part) in the determination of Scheduled Principal Payments.

“ Secured Nonrecourse Obligations ” means (i) secured obligations of Borrower taken on a consolidated basis where recourse of the payee of such obligations is expressly limited to an assigned lease or loan receivable and the property related thereto, (ii) debt of Single Transaction Subsidiaries, or (iii) liabilities of Borrower taken on a consolidated basis to any manufacturer of leased equipment where such liabilities are payable solely out of revenues derived from the leasing or sale of such equipment; excluding, however, nonrecourse obligations incurred in connection with leveraged lease transactions as determined in accordance with GAAP.

“ Standby Letter of Credit ” shall have the meaning ascribed thereto in Section 2.02(c) hereof.

“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  LIBOR Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“ Subordinated Indebtedness ” means all Indebtedness which is subordinated to the Obligations by its terms or pursuant to a subordination agreement, in each case, reasonably acceptable to the Administrative Agent.

“ Subsidiary ” means, with respect to any Person (the “ Parent ”) at any date, any other Person the accounts of which would be consolidated with those of the Parent in the Parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other Person (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held by the Parent, or (b) the financial statements of which

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shall be (or should be) consolidated with the financial statements of such Person in accordance with GAAP.

“ Subsidiary Guarantor ” means any Subsidiary that executes and delivers a Subsidiary Guaranty; provided , however , “Subsidiary Guarantor” shall exclude Inversiones Kara Sea Srl.

“ Subsidiary Guaranty ” means any guaranty executed by any Subsidiary of Borrower in favor of Lenders pursuant to Section 6.18 hereof.

“ Tangible Capitalization ” means, as of any date, the sum of Tangible Net Worth at such date plus Total Funded Debt at such date.

“ Tangible Net Worth ” means the excess of total assets over total liabilities, total assets and total liabilities each to be determined in accordance with GAAP consistent with those applied in the preparation of the Financial Statements referred to in Section 6.01 hereof, excluding, however, from the determination of total assets all assets which would be classified as intangible assets under GAAP, including, without limitation, capitalized organizational costs, goodwill, licenses, patents, trademarks, trade names, copyrights and franchises.

“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“ Telerate Page 3750 ” means the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service), or such other service as may be nominated as the information vendor for purposes of displaying rates or prices comparable to LIBOR.

“ Termination Date ” means the fifth anniversary of the Effective Date.

“ Title XI Guaranties ” means United States government guaranties of debt instruments issued to fund the acquisition of one or more vessels, which guaranties are secured by preferred mortgages over the whole of such financed vessels, as provided in 46 U.S.C. Appendix Section 1271 et seq . and the regulations promulgated by the Secretary of Transportation thereunder.

“ Total Funded Debt ” means, as of any date, all Indebtedness of K-Sea and its consolidated Affiliates, including, without limitation, Borrower and any Guarantor, on a consolidated basis, of the kinds and types (without duplication) described in clauses (a), (b), (c), (d), (e), (f), (g), (h), (j) (excluding obligations in respect of letters of credit issued as credit support of obligations for borrowed money of the Borrower or any Guarantor included in the determination of Total Funded Debt) and (k) of the definition of Indebtedness.

“ Total Funded Debt to EBITDA Ratio ” means, at any date of determination, the ratio of Total Funded Debt divided by EBITDA for the four fiscal quarter period ending on such date or, if such date is not the last day of a fiscal quarter, for the immediately preceding four fiscal quarter period.

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“ Total Funded Debt to Tangible Capitalization Ratio ” means, at any date of determination, the ratio of Total Funded Debt divided by Tangible Capitalization.

“ Transactions ” means the execution, delivery and performance by Borrower and Guarantors of this Agreement and the other Loan Documents, the making of Loans and the use of the Proceeds thereof.

“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; provided , that to the extent that the UCC is used to define any term herein or in any Loan Document and such term is defined differently  in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern; provided , further , that in the event that, by reason or mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to Administrative Agent’s or any Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Section 1.02                             Terms Generally .  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits, Schedules and Annexes to, this Agreement, and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

Section 1.03                             Accounting Terms; GAAP .  Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , that, if Borrower notifies the Administrative Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation

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of such provision (or if the Administrative Agent notifies Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

THE LOANS

Section 2.01                             Commitments .   Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment.  Within the foregoing limits and subject to the terms and conditions set forth herein, Borrower may borrow, prepay and reborrow Loans.

Section 2.02                             Loans .

(a)                                   Each Loan shall be made by the Lenders ratably in accordance with their respective Commitments.  The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided , that the Commitments of Lenders are several and no Lender shall be responsible for any other Lender’s failure to make any Loan as required.

(b)                                  Subject to the terms and conditions contained herein and until the Termination Date, the Lenders shall make loans to Borrower on a revolving basis in amounts requested by Borrower from time to time (the “ Loans ” and each, a “ Loan ”) in an aggregate amount outstanding at any time not to exceed the amount permitted by this Section 2.02.  Each Loan shall be in an aggregate principal amount of not less than the Minimum Loan Amount or an integral multiple of $100,000.00 in excess thereof.

(c)                                   Subject to availability, Borrower may request the L/C Issuer to issue trade, commercial documentary letters of credit (each, a “ Documentary Letter of Credit ”) and standby letters of credit (“ Standby Letters of Credit ”, and each, a “ Standby Letter of Credit ”, collectively with Documentary Letters of Credit, “ Letters of Credit ”), in Dollars or any Alternative Currency, during the period from the Effective Date to the thirtieth Business Day prior to the Maturity Date; provided that immediately after giving effect to the issuance of each Letter of Credit (i) the Letter of Credit Exposure of all Lenders would not exceed the Letter of Credit Sublimit and (ii) the Revolving Credit Exposure of all Lenders would not exceed the aggregate Commitments of all Lenders.

(d)                                  The sum of the aggregate principal amount of all Loans and the aggregate Letters of Credit Exposure shall at no time exceed the lesser of (i) the Maximum Amount and (ii) the Borrowing Base.  The Lenders shall have no obligation to make any Loan and the L/C Issuer shall have no obligation to issue any Letter of Credit if, after giving effect to the making of such

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Loan or the issuance of such Letter of Credit, the Revolving Credit Exposure would exceed the lesser of (i) the Maximum Amount and (ii) the Borrowing Base.

(e)                                   Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Loan if the Interest Period requested with respect thereto would end after the Termination Date, and Borrower shall not be entitled to request the issuance of any Letter of Credit or any renewal thereof which would expire after the Termination Date or provides for a drawing thereunder after the Termination Date.

Section 2.03                             Interest .

(a)                                   Base Rate Loans shall, in each case, bear interest at the Base Rate plus the Applicable Margin.

(b)                                  LIBOR Loans shall, in each case, bear interest at the Adjusted LIBOR Rate for the Interest Period in effect for such LIBOR Loan plus the Applicable Margin.

(c)                                   Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, then, so long as such Event of Default is continuing, all principal of each Loan and each fee and other amount then due and  payable by Borrower hereunder shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the Base Rate plus the Applicable Margin for Base Rate Loans.

(d)                                  Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan, provided that (i) interest accrued pursuant to paragraph (c) of this Section 2.03 shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any LIBOR Loan prior to the end of the current Interest Period therefor, accrued interest on such LIBOR Loan shall be payable on the effective date of such conversion.

(e)                                   All interest hereunder shall be computed on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day).  The applicable Base Rate, Adjusted LIBOR Rate or LIBOR shall be determined by the Administrative Agent, and such determination shall be conclusive absent clearly demonstrable error.

(f)                                     Each Loan initially shall be of the type specified in the applicable Loan Request and, in the case of a LIBOR Loan, shall have an initial Interest Period as specified in such Loan Request.  Thereafter, Borrower may elect to convert such Loan to a different type or to continue such Loan and, in the case of a LIBOR Loan, may elect Interest Periods therefor, all as provided in this Section 2.03.  Borrower may elect different options with respect to different portions of the affected Loan, in which case each such portion shall be allocated ratably among the Lenders.

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(g)                                  To make an election pursuant to this Section 2.03, Borrower shall notify the Administrative Agent of such election by telephone by the time that a Loan Request would be required under Section 2.05 if Borrower were requesting a Loan of the type resulting from such election to be made on the effective date of such election.  Each such interest rate election made telephonically shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written interest rate election in a form approved by the Administrative Agent and signed by Borrower.

(h)                                  Each telephonic and written interest rate election shall specify (i) the Loan to which such interest rate election applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Loans (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Loan); (ii) the effective date of the election made pursuant to such interest rate election, which shall be a Business Day; (iii) whether the resulting Loan is to be a Base Rate Loan or a LIBOR Loan; and (iv) if the resulting Loan is a LIBOR Loan, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “ Interest Period ”.  If any such interest rate election requests a LIBOR Loan but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(i)                                      Promptly following receipt of an interest rate election, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Loan.

(j)                                      If Borrower fails to deliver a timely interest rate election with respect to any LIBOR Loan prior to the end of the Interest Period applicable thereto, then, unless such LIBOR Loan is repaid as provided herein at the end of such Interest Period, such LIBOR Loan shall be converted to a Base Rate Loan at the end of such Interest Period.  Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Loan may be converted to or continued as a LIBOR Loan and (ii) unless repaid, each LIBOR Loan shall be converted to a Base Rate Loan at the end of the Interest Period applicable thereto.

Section 2.04                             [RESERVED . ]

Section 2.05                             Requests for Loans .   To request a Loan, Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of any Base Rate Loan, not later than 11:30 a.m., New York City time, on the same day of such proposed Loan, (b) in the case of any LIBOR Loan, not later than 11:30 a.m., New York City time, three (3) Business Days before the date of such proposed Loan.  Each such telephonic Loan Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a Loan Request in the form attached hereto as Exhibit F and signed by Borrower.  Each such telephonic and written Loan Request shall specify the following information in compliance with Section 2.02 hereof:

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(i)                                      the aggregate amount of the requested Loan;

(ii)                                   the date of such Loan, which shall be a Business Day;

(iii)                                whether such Loan is to be a Base Rate Loan or a LIBOR Loan;

(iv)                               the location and number of Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06 hereof; and

(v)                                  whether the proceeds of such Loan shall be used for (x) working capital purposes or (y) vessel acquisition or capacity expansion purposes.

If no election as to the type of Loan is specified, then the requested Loan shall be a Base Rate Loan.  If no Interest Period is specified with respect to any requested LIBOR Loan, then Borrower shall be deemed to have selected an Interest Period of one month’s duration.  Promptly following receipt of a Loan Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made in connection with such Loan Request.

Section 2.06                             Funding of Loans .

(a)                                   Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders.  The Administrative Agent will make such Loans available to Borrower by promptly crediting or otherwise transferring the amounts so received, in like funds, to an account of Borrower maintained with the Administrative Agent and designated by Borrower in the applicable Loan Request.

(b)                                  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Loan that such Lender will not make available to the Administrative Agent such Lender’s share of such Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.06(a) and may, in reliance upon such assumption, make available to Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Loan available to the Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of Borrower, the interest rate that would be otherwise applicable to such Loan.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan.

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Section 2.07                             Termination and Reduction of Commitments .

(a)                                   Unless previously terminated, the Commitments shall terminate on the Termination Date.

(b)                                  Borrower may at any time terminate, or from time to time reduce, the Commitments, provided that (i) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the sum of the Revolving Credit Exposures would exceed the total Commitments and (ii) each such reduction shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000.

(c)                                   Each reduction of the Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments.  Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under Section 2.07(b) at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by Borrower pursuant to this Section 2.07 shall be irrevocable, provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.  Any termination or reduction of the Commitments hereunder shall be permanent.

Section 2.08                             Repayment of Loans; Evidence of Debt .

(a)                                   Borrower hereby unconditionally promises to pay to the Administrative Agent for account of each Lender the then unpaid principal amount of each Loan on the Termination Date.

(b)                                  Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the debt of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c)                                   The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, whether such Loan is a Base Rate Loan or a LIBOR Loan and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)                                  The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided , that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of

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Borrower to repay the Loans and other Obligations in accordance with the terms of this Agreement.

(e)                                   The Loans made by any Lender may, upon request of such Lender, be evidenced by a Note in the form attached hereto as Exhibit A .  In such event, Borrower shall execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) substantially in the form as attached hereto as Exhibit A and otherwise in form and substance acceptable such Lender.  Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 10.07 hereof) be represented by one or more Notes in such form payable to the order of the payee named therein.  Each such Lender may enter Loans and repayment made on any Note; provided , however , that failure to do so shall not affect Borrower’s obligations to repay all Loans made.

(f)                                     Together with any repayment of Loans, Borrower shall advise the Administrative Agent of the amount of such repayment (if any) to be allocated to Loans the proceeds of which were used for working capital purposes by Borrower.

Section 2.09                             Prepayment of Loans .

(a)                                   Borrower shall have the right at any time and from time to time to prepay any Loan in whole or in part, subject to the requirements of this Agreement, including, without limitation, Section 2.11.

(b)                                  If as of any date the aggregate Revolving Credit Exposure of all Lenders as of such date exceeds the aggregate Commitments, then in such event Borrower shall immediately prepay the Loans by an amount necessary to eliminate any such excess (or if the Loans have been paid in full and the Letter of Credit Exposure of all Lenders is greater than zero, deposit into the Cash Collateral Account an amount equal to 105% of such excess).

(c)                                   If as of any date the aggregate Revolving Credit Exposure of all Lenders as of such date exceeds the Borrowing Base, then in such event Borrower shall immediately prepay the Loans by an amount necessary to eliminate any such excess (or if the Loans have been paid in full and the Letter of Credit Exposure of all Lenders is greater than zero, deposit into the Cash Collateral Account an amount equal to 105% of such excess).

(d)                                  Within fifteen (15) days after receipt by any Credit Party of Net Proceeds from any Asset Disposition (other than Extraordinary Receipts the disposition of which shall be governed by the terms of Section 2.09(e)), Borrower shall prepay the then outstanding Loans in an amount equal to the lesser of (i) one-hundred percent (100%) of such Net Proceeds and (ii) the Orderly Liquidation Value of the Pool Vessel which is the subject of such Asset Disposition ( provided that after the occurrence of an Event of Default, Borrower shall prepay the then outstanding Loans in an amount equal to one-hundred percent (100%) of such Net Proceeds); provided , that, so long as no Event of Default shall exist, no prepayment of the then outstanding Loans will be required under this Section 2.09(d) with respect to Net Proceeds from Asset Dispositions, not exceeding $3,000,000 in any Fiscal Year, to the extent that such Net Proceeds

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are reinvested (or are committed, pursuant to a binding written commitment, to be reinvested) in new or used vessels within twelve (12) months after receipt thereof; provided further , however , that Borrower shall prepay the then outstanding Loans in an amount equal to (x) all Net Proceeds from Asset Dispositions received in any Fiscal Year in excess of $3,000,000, plus, without duplication, (y) all Net Proceeds not so reinvested (or committed to be reinvested) within twelve (12) months after receipt thereof (which amounts shall be repaid not later than the date that is twelve (12) months after the date of receipt thereof).

(e)                                   Within fifteen (15) days after receipt of Net Proceeds by any Credit Party from any Extraordinary Receipt received by or paid to or for the account of any Credit Party and not otherwise included in Section 2.09(d), Borrower shall prepay the then outstanding Loans in an amount equal to the lesser of (i) one-hundred percent (100%) of such Net Proceeds and (ii) the Orderly Liquidation Value of the Pool Vessel which is the subject of such Asset Disposition ( provided that after the occurrence of an Event of Default, Borrower shall prepay the then outstanding Loans in an amount equal to one-hundred percent (100%) of such Net Proceeds).

(f)                                     In the event of any partial reduction or termination of the Commitments, then (i) at or prior to the date of such reduction or termination, the Administrative Agent shall notify Borrower and the Lenders of the sum of the Revolving Credit Exposures after giving effect thereto and (ii) if such sum would exceed the total Commitments after giving effect to such reduction or termination, then Borrower shall, on the date of such reduction or termination, prepay the Loans in an amount sufficient to eliminate such excess; provided , that if on the date of such a reduction of the Commitments, the aggregate Revolving Credit Exposure of all of the Lenders exceeds the aggregate Commitments of all of the Lenders after giving effect to such reduction and, if the Loans have been paid in full and the Letter of Credit Exposure of all Lenders is greater than zero, Borrower shall deposit into the Cash Collateral Account an amount in cash which would cause the balance on deposit in the Cash Collateral Account to equal the sum of the Letter of Credit Exposure of all Lenders.

(g)                                  Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a LIBOR Loan, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of Base Rate Loan, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Loan or portion thereof to be prepaid, provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07(c), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07(c).  Promptly following receipt of any such notice relating to a Loan, the Administrative Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Loan shall be in an integral multiple of $100,000 and not less than $500,000.  Each prepayment shall be applied ratably to the Loans included in such prepayment notice.  Prepayments shall be accompanied by accrued interest to the extent required by Section 2.03.

(h)                                  The provisions of Section 2.08(f) shall apply to any prepayment made under this Section 2.09.

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Section 2.10                             Fees .

(a)                                   Borrower shall pay to the Administrative Agent, for the account of the Lenders in accordance with each Lender’s Applicable Percentage, a commitment fee (the “ Commitment Fee ”), during the period from the Effective Date through the Termination Date at a rate per annum equal to the Commitment Fee Margin on the average daily amount of the unused Commitment of such Lender.  The Commitment Fee shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such day to occur following the Effective Date, on the date of any reduction in the Commitments (to the extent of such reduction) and on the Termination Date

 (b)                               Borrower shall pay to the Administrative Agent, for the account of the Lenders in accordance with each Lender’s Applicable Percentage, commissions (the “ Letter of Credit Fees ”) with respect to Letters of Credit for the period from and including the date of issuance of each Letter of Credit through the expiration date of such Letter of Credit, at a rate per annum equal to the LIBOR Margin, in each case on the average daily maximum amount available under any contingency to be drawn under such Letter of Credit.  The Letter of Credit Fees shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such day to occur following the Effective Date, and on the date that the Commitments shall expire.  In addition to the Letter of Credit Fees, Borrower shall pay to the L/C Issuer, for its own account, the L/C Issuer’s standard fees and charges customarily charged to customers similar to Borrower with respect to any Letter of Credit.

(c)                                   Borrower shall pay to the L/C Issuer, for its own account, a fronting fee in respect of each Letter of Credit issued by the L/C Issuer hereunder (the “ Fronting Fee ”), computed at the rate of 0.125% per annum on the maximum daily amount available for drawing under such Letter of Credit.  Accrued Fronting Fees shall be payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such day to occur following the Effective Date, and on the first day on or after the date that the Commitments shall expire upon which no Letters of Credit remain outstanding.

(d)                                  Borrower shall pay to each Lender, the Administrative Agent, the Collateral Trustee and the L/C Issuer, for its own account, fees and other amounts payable in the amounts and at the times set forth in the letter agreement dated February 24, 2005 between K-Sea and KeyBank and as may otherwise be separately agreed upon between the Borrower and such Person.

(e)                                   Fees and other amounts paid shall not be refundable under any circumstances.  All fees shall be computed on the basis of a 360-day year for the actual number of days elapsed (including the first day but excluding the last day).

(f)                                     KeyBank agrees to pay Borrower, upon the Effective Date, a reimbursement of the pro-rata fee paid on the Existing MARAD Letter of Credit.

Section 2.11                             Increased Costs; Illegality .

(a)                                   If any Change in Law shall:

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(i)                                      impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer (except any such reserve requirement reflected in the Adjusted LIBOR Rate); or

(ii)                                   impose on any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer or the London interbank market any other condition affecting this Agreement, any LIBOR Loans made by Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer or any participation therein,

and the result of any of the foregoing shall be to increase the cost to such Person of making or maintaining any LIBOR Loan hereunder (or of maintaining its obligation to make any such Loan) or to increase the cost to such Person or to reduce the amount of any sum received or receivable by such Person hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Person such additional amount or amounts as will compensate such Person for such additional costs incurred or reduction suffered.  Failure to demand compensation pursuant to this Section shall not constitute a waiver of such Person’s right to demand such compensation.

(b)                                  If any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Person’s capital or on the capital of such Person’s holding company, if any, as a consequence of this Agreement or the Loans made, Letters of Credit issued or commitments held available by such Person to a level below that which such Person or such Person’s holding company could have achieved but for such Change in Law (taking into consideration such Person’s policies and the policies of such Person’s holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer such additional amount or amounts as will compensate such Person or such Person’s holding company for any such reduction suffered.

(c)                                   A certificate of any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer calculating and setting forth the amount or amounts necessary to compensate such Person or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to Borrower and shall be conclusive absent manifest error.  Borrower shall pay such Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)                                  Failure or delay on the part of any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Person right to demand such compensation; provided , that Borrower shall not be required to compensate any Lender, the Administrative Agent, the Collateral Trustee or the L/C Issuer pursuant to this Section for any increased costs or reductions incurred more than nine months prior to the date that such Person notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Person’s intention to claim compensation therefor; provided , further , that, if the Change in Law giving rise to such increased

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costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof.

(e)                                   Notwithstanding any other provision of this Agreement, if, after the date of this Agreement, any Change in Law shall make it unlawful for any Lender to make or maintain any LIBOR Loan or to give effect to its obligations as contemplated hereby with respect to any LIBOR Loan, then, by written notice to Borrower and to the Administrative Agent:

(i)                                      such Lender may declare that LIBOR Loans will not thereafter (for the duration of such unlawfulness) be made by such Lender hereunder (or be continued for additional Interest Periods and Base Rate Loans will not thereafter (for such duration) be converted into LIBOR Loans), whereupon any request for a LIBOR Loan or to convert a Base Rate Loan to a LIBOR Loan or to continue a LIBOR Loan, as applicable, for an additional Interest Period shall, as to such Lender only, be deemed a request for a Base Rate Loan (or a request to continue a Base Rate Loan as such for an additional Interest Period or to convert a LIBOR Loan into a Base Rate Loan, as applicable), unless such declaration shall be subsequently withdrawn; and

(ii)                                   such Lender may require that all outstanding LIBOR Loans made by it be converted to Base Rate Loans, in which event all such LIBOR Loans shall be automatically converted to Base Loans, as of the effective date of such notice as provided in the last sentence of this paragraph.

In the event any Lender shall exercise its rights under clauses (i) or (ii) of this Section 2.11(e), all payments and prepayments of principal that would otherwise have been applied to repay the LIBOR Loans that would have been made by such Lender or the converted LIBOR Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such LIBOR Loans, as applicable.  For purposes of this Section 2.11(e), a notice to Borrower by any Lender shall be effective as to each LIBOR Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such LIBOR Loan; in all other cases such notice shall be effective on the date of receipt by Borrower.

Section 2.12                             Break Funding Payments .  In the event of (a) the payment or prepayment (voluntary or otherwise) of any principal of any LIBOR Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any LIBOR Loan other than on the last day of the Interest Period applicable thereto or (c) the failure to borrow, convert, continue or prepay any LIBOR Loan on the date specified in any Loan Request or other notice delivered pursuant Section 2.03 or 2.05 (regardless of whether such notice may be revoked under Section 2.07(c) and is revoked in accordance therewith), then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.  If such Loan Request or other notice relates to a LIBOR Loan, such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Loan, for the period from the date of such

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event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would in good faith bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.12 shall be delivered to Borrower and shall be conclusive absent manifest error.  Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof.

Section 2.13                             Taxes .

(a)                                   Any and all payments by or on account of any Obligation of any Credit Party hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided , that if such Credit Party shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, the Collateral Trustee, each Lender or L/C Issuer (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Credit Party shall make such deductions, and (iii) such Credit Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

(b)                                  In addition, the Credit Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

(c)                                   Each Loan Party shall indemnify the Administrative Agent, the Collateral Trustee, the L/C Issuer and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, the Collateral Trustee, the L/C Issuer or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability, together with copies of available documentation reflecting the imposition and amount of such Indemnified Taxes or Other Taxes delivered to Borrower by a Lender, the Collateral Trustee, the L/C Issuer or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(c)                                   As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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(d)                                  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by Borrower, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate.

Section 2.14                             Payments Generally; Pro Rata Treatment; Sharing of Set-offs .

(a)                                   Each Credit Party shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or under Section 2.11, 2.12, 2.13 or 10.06 hereof, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent at its offices at 127 Public Square, Cleveland, Ohio 44114, Attn. KCIB Loan Services, except that payments pursuant to Sections 2.11, 2.12, 2.13 and 10.06 hereof shall be made directly to the Persons entitled thereto.  The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments hereunder shall be made in Dollars.

(b)                                  (i)                                      So long as (x) no Default with respect to any payments due hereunder or under any of the Obligations or (y) Event of Default shall have occurred and be continuing, each payment made by Borrower received by the Administrative Agent pursuant to paragraph (a) of this Section shall be applied, first , to any costs, expenses, fees or other amounts due under this Agreement or under the other Loan Documents not constituting principal and interest due under the Loans, second , to default interest at the rate provided for Section 2.03(c) hereof, third , to interest due on the unpaid principal balance of each Loan, fourth , to the payment in full of principal and all other Obligations which are then due and payable.  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due on any Loans, such funds shall be applied, first , to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, second , to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties, and third , all remaining amounts, if any, shall be applied as provided in the first sentence of this Section 2.14(b)(i).

(ii)                                   So long as no (x) Default with respect to any payments due hereunder or under any of the Obligations or (y) Event of Default shall have occurred and be continuing, any amounts received by Collateral Trustee, the Administrative Agent or any Lender as a result of an Event of Loss with respect to any Pool Vessel (including, without limitation, any payment of prepayment amounts under Section 2.09 hereof or insurance or condemnation

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proceeds) shall be retained by the Lenders as cash collateral to the extent the aggregate Orderly Liquidation Value of the remaining Pool Vessels is less than the greater of (A) $50,000,000.00 and (B) an amount such that the Asset Coverage Ratio after giving effect to such Event of Loss is not less than 1.25:1.00, until such time as Borrower pledges another Qualified Pool Vessel or Qualified Pool Vessels to increase the aggregate Orderly Liquidation Value of the Pool Vessels to not less than the greater of (A) $50,000,000.00 and (B) an amount such that the Asset Coverage Ratio after giving effect to such pledge is not less than 1.25:1.00, at which time such amounts shall be applied, first , for application against Loans at the end of any then current Interest Period or Periods, second , to the payment in full of all the Obligations which are then due and payable, and, third , the balance, if any, after payment of the foregoing amounts, shall be paid by the Lenders to Borrower.

(iii)                                So long as no (x) Default with respect to any payments due hereunder or under any of the Obligations or (y) Event of Default shall have occurred and be continuing, all Proceeds from time to time received by the Collateral Trustee, the Administrative Agent or any Lender shall be applied, first , to any costs, expenses, fees or other amounts due under this Agreement and the other Loan Documents not constituting principal and interest due under the Loans, second , to the payment in full of all the other Obligations which are then due and payable, third , if provision as to the application of such amounts is made in this Agreement or any other Loan Document, the Collateral Trustee, the Administrative Agent or such Lender shall, in its sole discretion, either apply such payment to the purpose for which it was made or pay it to Borrower, which shall so apply it and, fourth , if due to Borrower, the Collateral Trustee, the Administrative Agent or such Lender shall pay such amounts to Borrower.

(iv)                               All payments received and amounts realized by the Lenders after a Default shall have occurred and be continuing, but prior to the occurrence of an Event of Default or any acceleration of any Loan or Note, all Proceeds or other amounts received in repayment of the Collateral shall be held by the Collateral Trustee, the Administrative Agent or any Lender as part of the Collateral until such time as no Defaults or Events of Default shall be continuing hereunder (at which time such funds shall be paid to Borrower) or until such funds are applied pursuant to Section 8.02 hereof.  The Collateral Trustee, the Administrative Agent or any Lender shall apply the cash proceeds of Collateral actually received by it from any sale, lease, foreclosure or other disposition of the Collateral to payment pro rata of the Obligations, in whole or in part (including reasonable attorneys’ fees and legal expenses incurred by the Collateral Trustee, the Administrative Agent or the Lenders with respect thereto or otherwise chargeable to Borrower).  The Lenders shall apply all such receipts ratably against Obligations under the Facility.  Borrower shall remain liable to the Lenders for the payment of any deficiency together with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including reasonable attorneys’ fees and legal expenses.

(v)                                  After an Event of Default shall have occurred and be continuing and after Lenders have either, (i) as assignee from Borrower of any charter of any of the Pool Vessels, declared such charter to be in default or terminated in accordance with the terms thereof, or (ii) declared all amounts outstanding hereunder to be due and payable pursuant to Section 8.02 hereof, or done both (i) and (ii), all payments received and amounts realized by any Lender, as well as all payments or amounts then held by the Lenders as part of the Collateral,

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shall be applied against the Obligations in such order and such manner as the Lenders, in their sole discretion, may determine and as otherwise provided in the other Loan Documents and the documents evidencing the other Obligations, and the balance, if any, shall be paid by the Lenders to Borrower.

(c)                                   If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of, or interest on, any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other applicable Lender, then the applicable Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other applicable Lenders to the extent necessary so that the benefit of all such payments shall be shared by the applicable Lenders ratably in accordance with the aggregate amount of principal of, and accrued interest on, their respective Loans, provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply).  Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Credit Party in the amount of such participation.

(d)                                  Unless the Administrative Agent shall have received notice from a Credit Party prior to the date on which any payment is due to the Administrative Agent for the account of Lenders, the Administrative Agent, the L/C Issuer or the Collateral Trustee hereunder that Borrower will not make such payment, the Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to Persons the amount due.  In such event, if Borrower has not in fact made such payment, then each such Person severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Person with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e)                                   If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.06, 2.14(d) or 2.15 hereof, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

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Section 2.15                             Letters of Credit .

(a)                                   The Borrower may request the L/C Issuer to issue letters of credit during the period from the Effective Date to the thirtieth Business Day prior to the Maturity Date, provided that immediately after the issuance of each Letter of Credit (i) the Letter of Credit Exposure of all Lenders would not exceed the Letter of Credit Sublimit and (ii) the aggregate Revolving Credit Exposure of all Lenders would not exceed the aggregate Commitments of all Lenders.  To request the issuance of a Letter of Credit, the Borrower shall notify the Administrative Agent and the L/C Issuer by the delivery of a Credit Request in the form of Exhibit G , which shall be sent by facsimile and shall be irrevocable (confirmed promptly, and in any event within five Business Days, by the delivery to the Administrative Agent of a Credit Request manually signed by the Borrower), at least three Business Days prior to the requested date of issuance, specifying (x) in the case of a Standby Letter of Credit, (A) to the extent not previously delivered to the Administrative Agent, copies of all agreements between Borrower and the beneficiary of such Standby Letter of Credit pertaining to the issuance of such Standby Letter of Credit and (B) a copy of the form of a Standby Letter of Credit which is attached hereto as Exhibit D , and (y) in the case of a Documentary Letter of Credit, a copy of the form of the application for a documentary letter of credit which is attached hereto as Exhibit E and which may be amended by the L/C Issuer from time to time, and in the case of each Letter of Credit, to the extent not included in the foregoing:  (I) the beneficiary of such Letter of Credit, (II) Borrower’s proposal as to the conditions under which a drawing may be made under such Letter of Credit and the documentation to be required in respect thereof, (III) the maximum amount to be available under such Letter of Credit, (IV) the currency such Letter of Credit shall be denominated in (which shall be Dollars or an Alternative Currency then made available by the Administrative Agent and the L/C Issuer) and (V) the requested dates of issuance and expiration.  Such Credit Request shall be accompanied by such other certificates, documents (including a reimbursement agreement) and other information as may be required by the L/C Issuer in accordance with its customary procedures (all of the instruments documents, certificate, applications and information described in the immediately preceding two sentences, collectively, the “ Letter of Credit Documentation ”).  Upon receipt of such Credit Request from the Borrower, the Administrative Agent shall promptly notify each Lender thereof.  Subject to the satisfaction of the terms and conditions of this Agreement, the L/C Issuer shall issue each requested Letter of Credit.  In the event of any conflict between the provisions of this Agreement and any Letter of Credit Documentation, the provisions of this Agreement shall control.  Each of the Credit Parties hereby acknowledges and agrees that the Existing Letters of Credit are Letters of Credit hereunder and the Lenders hereby assume and are jointly and severally obligated with respect to all Reimbursement Obligations related thereto.  Each of the Existing Letters of Credit shall be deemed to be a “ Letter of Credit ” for all purposes of this Agreement and the other Loan Documents.

(b)                                  Each Letter of Credit shall be issued for the account of the Borrower and in support of obligations, contingent or otherwise, of the Borrower or any Subsidiary arising in the ordinary course of business.  Each Documentary Letter of Credit shall expire no later than 180 days from its date of issuance.  Each Standby Letter of Credit shall either (A) have an expiration date which shall be not later than the earlier of (x) 364 days after the date of issuance thereof or (y) fifteen (15) Business Days before the Maturity Date or (B) contain “evergreen”

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provisions under which the such Standby Letter of Credit shall have an initial expiration date of not more than one year from issuance, which expiration date shall be deemed extended on an annual basis for successive periods of not more than one year unless notice of termination is given by the L/C Issuer, provided , however , no such Standby Letter of Credit shall have an expiration date extending or be so extendable beyond the Maturity Date.  Any renewal, or any extension of any expiry date, of a Letter of Credit shall constitute the issuance of such Letter of Credit for all purposes of this Agreement.  In no event shall any Letter of Credit expire later than fifteen (15) Business Days prior to the Maturity Date.

(c)                                   Immediately upon the issuance of a Letter of Credit, the L/C Issuer shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the L/C Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Applicable Percentage thereof, in such Letter of Credit and the obligations of Borrower with respect thereto and any security therefor and any guaranty pertaining thereto at any time existing.  Each Lender, with respect to each Existing Letter of Credit, hereby purchases, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Applicable Percentage thereof, in each such Existing Letter of Credit and the obligations of Borrower with respect thereto and any such security therefor and guaranty pertaining thereto at any time existing.

(d)                                  The L/C Issuer shall promptly notify (i) each Lender of the L/C Issuer’s receipt of a drawing request under any Letter of Credit, stating the amount of such Lender’s Applicable Percentage of such drawing request and the date on which such request will be honored (the “ Honor Date ”) and (ii) the Administrative Agent and Borrower of the amount of such drawing request and the Honor Date.  Any failure of the L/C Issuer to give or any delay in the L/C Issuer’s giving any such notice shall not release or diminish the obligations of Borrower or any Lender hereunder.  In determining whether to pay under any Letter of Credit, the L/C Issuer shall have no obligation to any Lender or Borrower other than to confirm that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit.  In the absence of gross negligence or willful misconduct on the part of the L/C Issuer, the L/C Issuer shall have no liability to any Lender or Borrower for any action taken or omitted to be taken by it under or in connection with any Letter of Credit, including any such action negligently taken or negligently omitted to be taken by it.

(e)                                   Not later than 11:00 a.m., New York City time, on the Honor Date with respect to any drawing under any Letter of Credit, Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing and in the applicable currency.  If Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of such failure, the amount of the unreimbursed drawing (the “ Unreimbursed Amount ”), and such Lender’s Applicable Percentage thereof.  In the case of any Letter of Credit denominated in an Alternative Currency, the Unreimbursed Amount shall be redenominated into Dollars and equal the Dollar Equivalent thereof, and the Administrative Agent shall so notify the Lenders in the notice described in the preceding sentence. In such event, Borrower shall be deemed to have requested a Base Rate Loan to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount (or the

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Dollar Equivalent thereof, if applicable), without regard to the Minimum Loan Amount for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the aggregate Commitments of the Lenders and the conditions set forth in Section 5.02 (other than the delivery of a Loan Request).  Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.  Each Lender shall promptly and unconditionally pay to the Administrative Agent, for the account of the L/C Issuer, the amount of such Lender’s Applicable Percentage of such Unreimbursed Amount in Dollars in immediately available funds on the Business Day the L/C Issuer so notifies such Lender if such notice is given prior to 12:00 Noon or, if such notice is given after 12:00 Noon, such Lender shall make its Applicable Percentage of such Unreimbursed Amount available to the L/C Issuer prior to 12:00 Noon on the next succeeding Business Day.

(f)                                     If and to the extent any Lender shall not make such Lender’s Applicable Percentage of any Reimbursement Obligations available to the L/C Issuer when due in accordance with Section 2.15(e), such Lender shall pay interest to the L/C Issuer on such unpaid amount for each day from the date such payment is due until the date such amount is paid in full to the L/C Issuer at the Federal Funds Effective Rate until (and including) the third Business Day after the date due and thereafter at the Base Rate.  The obligations of the Lenders under this Section 2.15(f) are several and not joint or joint and several, and the failure of any Lender to make available to the L/C Issuer its Applicable Percentage of any Reimbursement Obligations when due in accordance with Section 2.15(e) shall not relieve any other Lender of its obligation hereunder to make its Applicable Percentage of such Reimbursement Obligations so available when so due, but no Lender shall be responsible for the failure of any other Lender to make such other Lender’s Applicable Percentage of such Reimbursement Obligations so available when so due.

(g)                                  Whenever the L/C Issuer receives a payment of a Reimbursement Obligation from or on behalf of Borrower as to which the L/C Issuer has received any payment from a Lender pursuant to Section 2.15(e), the L/C Issuer shall promptly pay to such Lender an amount equal to such Lender’s Applicable Percentage of such payment from or on behalf of Borrower.  If any payment by or on behalf of Borrower and received by the L/C Issuer with respect to any Letter of Credit is rescinded or must otherwise be returned by the L/C Issuer for any reason and the L/C Issuer has paid to any Lender any portion thereof, each such Lender shall forthwith pay over to the L/C Issuer an amount equal to such Lender’s Applicable Percentage of the amount which must be so returned by the L/C/Issuer.

(h)                                  Each Lender, upon the demand of the L/C Issuer, shall reimburse the L/C Issuer, to the extent the L/C Issuer has not been reimbursed by Borrower after demand therefor, for the reasonable costs and expenses (including reasonable attorneys’ fees) incurred by the L/C Issuer in connection with the collection of amounts due under, and the preservation and enforcement of any rights conferred by, any Letter of Credit or the performance of the L/C Issuer’s obligations as issuer of the Letters of Credit under this Agreement in respect thereof, to the extent of such Lender’s Applicable Percentage of the amount of such costs and expenses provided , however , that no Lender shall be liable for the payment of any portion of such

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liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent the same result solely from the gross negligence or willful misconduct of the L/C Issuer.  The L/C Issuer shall refund any costs and expenses reimbursed by such Lender that are subsequently recovered from Borrower in an amount equal to such Lender’s Applicable Percentage thereof.

(i)                                      The obligation of Borrower to reimburse the L/C Issuer pursuant to this Section 2.15, and the obligation of each Lender to make available to the L/C Issuer the amounts set forth in this Section 2.15 shall be absolute, unconditional and irrevocable under any and all circumstances, shall be made without reduction for any set-off, counterclaim or other deduction of any nature whatsoever, may not be terminated, suspended or delayed for any reason whatsoever, shall not be subject to any qualification or exception and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including any of the following circumstances: (1) any lack of validity or enforceability of this Agreement or any of the other Loan Documents, (2) the existence of any claim, setoff, defense or other right which Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the L/C Issuer, any Lender or any other Person, whether in connection with this Agreement, any other Loan Document, any Letter of Credit, the transactions co